Company History
Subros Ltd formerly incorporated as ‘Subros Pvt Ltd.’ in Feb.'85 was promoted by Ramesh Suri Lalit Suri and Jayant Nanda. It turned into a public limited company in Oct.'85 in name of Subros Limited, as a joint venture with 36.79% ownership by the Indian promoters and 20% ownership by Denso Corporation, Japan & 11.96% ownership by Suzuki Motor Corporation, Japan.
It is the leading manufacturer of AC for automotive applications in India, in technical collaboration with Denso.
The company has grown from a capacity of 15,000 AC units in 1985 comprising of largely an assembly operation, into the largest and only integrated manufacturing unit in India for Auto Air conditioning systems. Subros manufactures compressors, condensers, heat exchangers, HVAC system and all connecting elements required to complete AC loop and caters to all segments viz. passenger vehicles, buses, trucks, refrigeration transport, off- roaders, residential air conditioners & recently forayed in to AC for Railways.
Market leader in Automotive AC
It is the market leader and its market share in Automotive AC is increasing, which currently stands at 50% market share in Car AC, 54% in Truck AC & 17% in Bus AC.
Being a new entrant to residential AC components , it faces tough competition with existing well established players.
It has also recently entered in to Railway AC and has got orders from railways.
During 2023-24, It’s 94% revenue is from Car AC segment. However , the growing segments are Truck AC , Railways , Bus AC.
Govt mandate for 100% truck cabin AC from next year
The Govt has mandated to switch to 100% truck cabin AC to ensure driver comfort, Road safety and all truck manufacturers such as Tata motors , Ashok Leyland , Mahindra , Volvo eicher are supposed to switch over to 100% AC fitments in Trucks.
Auto technology agnostic
EV , Hydrogen , CNG , Ethanol or any alternative fuel technology can not disrupt Automotive AC business. Subros is already supplying AC to this class of vehicles and currently this forms 20% of their revenues.
Foray in to railways
No of AC trains are expected to increase in the coming days and Subros would eat up a piece of this segment too.
Residential / commercial AC
Subros supplies all its AC components like compressors , condensers, Hoses, pipes for window AC , split AC to Room AC OEM,'s
OEM’s
All Auto 4 wheelers OEM Maruti Suzuki , Tata Motors , Ashok Leyland , Mahindra & Mahindra, Volvo eicher, Daimler & many others.
Indian railway,
Voltas, Haier, Havells,
After sales service / spare parts sales post warranty
The company has opportunity to sale and service its product post warranty and earn revenue across the life cycle of the product
Cooling the planet
Overall , as Global warming rise, planet becomes warmer. Human beings wherever they are would need AC comfort.
Subros with 40 yrs of experience in providing cooling comfort in Transportation would reap the benefits.
Multi location manufacturing plants
Subros has manufacturing at Noida , Manesar, Pune, Chennai , Nalagarh and Karsanpura with an annual capacity of 1.5 Million AC Kits per annum beside a well equipped R&D Center and Tool Room at Noida.
Quarterly/ Annual performance 2023-24
profit before tax in quarter four, it is 45.30 crores, which is 5.47% of the net sale.
PBT margin with the corresponding quarter of the last year has improved by 70%. Profit after tax in Quarter 4 is 30.68, which is 3.70% of the net sale. And the PAT margin has improved by 65%.
The result summary for the year 2023-24, the revenue from operation is 3,070 crores, which is with a growth of 9%. EBITDA is 268 crores with a growth of 43% and PBT is 140.70 crores with a growth of 98%. PAT is 97.66 crores with a growth of 103%.
Risks &Threats
(1) The stock has almost doubled since the announcement of 100% factory fitment of AC in trucks. If the Govt takes “U” turn" in its decision of 100% Truck AC fitments, the stock may crash
(2) Maruti has a stake in Subros and so Maruti sources 100% of its requirements from Subros. If there is any change in this arrangement or Maruti withdraws it’s support by selling its stake in Subros
(3)The Auto industry is cyclical. So if the auto industry does not grow , then subros business would get affected.
However , since the company has diversified into railways , residential , commercial buildings and so the impact of any recession in auto can be countered to a great extent. Revenues from after sales service , spare parts during the life cycle of the product will help.
More details can be found from the following links :
Subros website
Q4 performance 2023-24
Investor ppt transcript for 2023-24
HDFC securities stock Research report / anal
ysis
Govt mandate for Truck AC
Discl: Invested from lower level may be biased.
The stock has run up quite a bit. It is not a buy sell recommendation.Please do your own assessment before investing.